How To Empower Your Family’s Financial Planning
Imagine that you wake up twenty years from now and retirement is getting closer each year. You've thought about getting your retirement savings in order, but you've procrastinated. For too many years. You know it'll be tough to make ends meet when you retire.
How do you want your retirement to look? Do you want to have long, lazy days by the pool, or on the golf course? Or do you want to worry about having enough to put food on the table?
It's never too late to start planning for your, and your family's future. But you need to set goals.
Think of athletes. Do you think they get up in the morning and dilly dally for a while? Around lunch, a thought cross their mind, "perhaps I should work out"?
Heck no! Athletes have clear and defined goals with what they do and they have a plan on how they should get there.
It's the same for successful CEOs and companies.
Why should you handle your life in any other way?
Financial Goals - What's That?
Have you ever hear that you need goals to motivate yourself to do stuff? Well, guess what, it's true in your finances too.
It's not only true, to be honest, it's darn well necessary when it comes to money. This is even more true for families and partners. You don't have to be in complete sync with your goals in your relationship, but being on the same page at least helps.
Imagine a family where the woman was all about buying expensive cars, while the man was saving for a house. Talk about conflicting goals. Can you see a problem with that in their future?
Let's say you want to set up a budget, as I'm sure you want, right? You could set it up and hope for the best. But what is the best? Why do you want to set up a budget in the first place?
A lot of people who start budgeting do it because they don't want to live paycheck to paycheck anymore. That's sort of a goal. But there's a why here somewhere too. Why are they tired of living paycheck to paycheck?
Well, because it sucks. Doh!
But let's dig a bit deeper. Could it be that they want to start saving for their future, or for college for their children?
Even if the example above isn't so far fetched, it might sound weird. Do you go from living paycheck to paycheck and then to college funds? If you've lived on the edge of your finances for a while, it's not unrealistic to think you might have gotten into debt.
A reasonable financial goal could then be to pay off debt. With a clear goal, it will be easier to reflect this in your entire financial life. Including your budget.
Once you've paid off the debt you might want to set up an emergency fund. Or, you might have done that while paying off debt. Either way, it’s a financial goal.
What Goal Should You Focus On Then?
Well, this depends on where you are in your financial situation. Common goals when budgeting can be to widen the gap between income and expenses, saving money, getting an emergency fund, getting money for investing, and so on.
To widen the gap between income and expenses means to decrease your expenses, most often. This is usually done by decreasing expenses that aren't necessary. It could also mean bringing in more money. You could bring in more money through an other job, or a side hustle.
Saving money is often more focused than just saving money. It could be to save money for a vacation or down payment on a house.
An emergency fund means to build a buffer between you and any emergencies that might jump you. Like, your car breaking down.
To figure out what goals you have for your budget and finances as a whole, you need to talk it out. Sit down with your partner, get a nice cup of coffee or tea and talk, talk, talk. What are your hopes and dreams for the future? What makes you sad and depressed about your finances?
The best way could be to start with the things that cause you pain and sadness. Make those the top priority. After that, focus on your dreams and hopes.
When you get to setting up the budget, later on, make it reflect your goals.
Short, And Long-Term Goals
When it comes to goal setting you should have both short, and long-term goals. A lot of people say that short-term goals should be doable inside of a year.
Short-term goals serve several purposes. First, you get stuff done faster. Second, you get motivated to continue towards long term goals, because you feel that you get things done on the way.
Long-term goals are, as the name suggests things that take longer to do. This could be investing for your retirement - or early retirement - it could be setting up a college fund for your kids, or paying off your mortgage.
Goals Are Great, But You Need A Plan
This might seem like you're doing the same thing as with the goals. But a plan is different, I promise.
Let's look at it like this, goals are the X that marks the spot and a plan is the map that gets you to the X.
When it comes to your finances this could mean that the goal is paying off debt.
The plan is how much you should pay off each month. It can also be how you will get extra money to pay off the debt faster. A plan can be how you chose to cut some expenses in order for you to free up money to put towards the debt payment.
As you see, it can be a lot of things.
A plan can be your entire budget and how you handle your budgeting altogether. It's all about how you use the tools to reach your goals.
If you've got clear long-term goals it would be possible for you to make a plan that lasts for the rest of your life. I know, things will happen along the way that will change how you plan. But if you have a long-term plan, you can at least adjust and not wonder how to face stuff you encounter.
It's the same with a goal.
In our family, a long-term goal is financial freedom and early retirement. But, we decided to get a house that we need to fix quite a bit. This has put a big dent in the plan to retire early. But we adjusted how we look at the retirement part instead.
Sure, it'll take a bit longer to get there. But we will live in a nice house with a low cost of living. Which helps in the long run.
What Does This Mean To You
Without a goal, you can't know where you're going with your financial life. Goals are great to set direction in life and money is part of life. So it makes sense to have goals here too.
Set short-term and long-term goals. Short-term goals are smaller and faster to do, like pay off car loans. Long-term goals are bigger and run for a longer time, like saving for college or a house.
Once you have goals set, make a plan. The plan is the roadmap to take you to the goal. It's how you will actually reach the goals you have set up.
As it often is with finances, there are many ways to get the same result. I write about things we do in our family that works for us. I love to hear about how you do things in your family and what works.
If you have ideas and suggestions, post them in the comments below and share them with fellow readers. Thanks!